Govt may ease rules on retail trading and more to boost FDI inflows

The government is weighing easing foreign direct investment (FDI) rules further in areas, including retail trading, to make it even easier for foreign companies to invest in India, a senior government official said on Friday.

US trade representative (USTR) Michael Froman said India needs to further open sectors like retail and financial services to improve the overall business environment. (Reuters)

The government is weighing easing foreign direct investment (FDI) rules further in areas, including retail trading, to make it even easier for foreign companies to invest in India, a senior government official said on Friday.

FDI in legal and some financial services, and information and broadcasting are also being looked into for further relaxation, the official confirmed to FE. The government is also seriously considering allowing the FDI in non-litigious areas of law — especially transactional legal services and international arbitration.

In retail, however, the relaxation in FDI could be more in the form of procedural changes initially rather than any drastic step on further liberalisation. Some retailers have sought a review of the maximum retail price labels on products.

Although the government has said 100% FDI will be permitted in trading — including through e-commerce — of food products produced or manufactured in India, critics have pointed out that no supermarket can attract massive footfall and be profitable with just food items on its shelves. The food processing ministry wants certain other items should also be allowed to be sold with food items to make it more attractive for investors.

Recently, department of industrial policy and promotion secretary Ramesh Abhishek had said the government is looking into certain “sticking issues” relating to the FDI.

The Narendra Modi government has already announced two big rounds of relaxations in the FDI regime, first in November 2015 and then in June this year, easing rules in over a dozen sectors ranging from real estate, pharmaceuticals, food marketing, aviation, defence to e-commerce and banking.

Earlier this month, US trade representative (USTR) Michael Froman said India needs to further open sectors like retail and financial services to improve the overall business environment.

He also cautioned India against becoming complacent about the recent positive trend in investment. Inflows of FDI (in equity) into India rose 29% in 2015-16 from a year before to $40 billion.